Accepted for publication in Journal of Financial Education. I am grateful to participants at the North American Case Research Institute 2002 conference in Banff, Canada, for their helpful comments and for research assistance from Wang Zhiqiang and Xu Zhi in preparing some tables. Please contact me at hugh-thomas@cuhk.edu.hk should you find any errors in the case.

Bank of China Hong Kong's Initial Public Offering

Abstract

China's entry into WTO has set a deadline on opening its financial services sector to foreign competition. Privatization is one strategy to help modernize the sector. The first bank in line for privatization is the Hong Kong commercial banking subsidiary of Bank of China (BOC), Bank of China Hong Kong (BOCHK), a subsidiary recently formed from the merged Hong Kong interests of BOC. Foreign investment and commercial bankers are meeting in January 2002 with BOC and BOCHK to negotiate the initial public offering (IPO) of BOCHK. But as the negotiations to IPO commence, a scandal erupts that adversely impacts the timing or pricing of the transaction. Students must decide the timing, number of shares, pricing, place of issue, use of proceeds and strategic investors and negotiate in alliance and competition with others. They analyze financial statements, strategy, industry position and equity valuation in the context of an international banking IPO.

IntroductionIt was January 2002. Top management of the Bank of China (BOC) was keen to proceed with the initial public offering (IPO) of shares of its newly reorganized subsidiary, Bank of China Hong Kong (BOCHK). BOC invited several foreign bankers to Beijing to discuss confidentially the IPO. These bankers included senior management from the equity underwriting departments of two investment banks Wall Street Associates and EuroUniversal Group and Asia Pacific executive committee members of two global financial groups, BankAssurance NV and FinServe Limited. The bankers would form and propose, either individually or jointly, various strategies for underwriting and strategic partnering on the IPO. It was up to BOC and BOCHK to assess the proposals and determine a plan for approaching the equity markets. As the rumor mill was operating with its usual efficiency, by the time the five teams of visiting bankers had spent one night in the Peking Hotel, they all knew what each other was doing in town. Bankers being bankers, they discussed the transaction and potential for mutual cooperation and competition among themselves.

BOC and the Chinese Banking IndustryBOCHK was a wholly owned subsidiary of BOC, the second largest of the Big Four state wholly-owed commercial banks in China  in order of size, Industrial & Commercial Bank of China, BOC, China Construction Bank and Agricultural Bank of China. The masthead of BOC's web-page "About Us" trumpeted "Welcome to The Best Bank in China." It was a boast that rang true  at least among the Big Four. More than any other sector of the Chinese economy, banking in the late 1990s and early 2000s was burdened with the failures of China's old planned economy. Under that system, banks had been effectively treasuries, providing funds for capital expansion as designated by the plan. If capital expansions were profitable, loans were repaid. If not, loans remained on the books for many years before they were finally written off. Because profitability was not often the main criterion for selecting planned projects, unprofitable projects were frequent. Although the reforms of the Chinese economy from state-planned to market-driven started in 1978, it was not until the 1990s that the reforms fundamentally addressed banking. Three particularly important aspects of this delay were (1) there was no effective bankruptcy...

...gain …... associated with the
expectation of housing occupation” (Levin and Wright, 1997). To counter the activities of
speculators, there are a number of possible solutions for the government. Increasing the
supply for first-time users, however, is the most comprehensive method to solve this
problem. The following paragraphs will first analyze the seriousness of housing
speculation. Then, it will introduce three-fold possible solutions and discuss the best
solution to curb the speculation.
Housing speculation has become serious since 2009 in when people overcame the
financial tsunami. In fact, average residential properties prices increased by around 24%
in 2010 following a 30 percent up in the previous year (Yung, 2011), but HongKong
average income rate only rose by 3.3 percent from 2009 to 2010 (the Census and
Statistics Department, 2011). Comparing the two figures, it is unaffordable for many
Hongkongers below 40 years of age to buy their own houses or apartments because
their salary increment may not correspond to the rapid increase in housing price. If
housing speculation continues to deteriorate continually, the benefits of real users will
be harmed as well as social stability.
2
Housing Speculation
Tsang Ka Lam
SID: 52613613
First, the government can collect Special Stamp Duty (SSD) from speculators to
curb the speculation but it cannot counter the activities of large speculators. Conpa CPA
Limited...

...the Individual Visit Scheme have been entirely debated. While some businessman welcome the scheme that likely enhance the economy in HongKong, normal citizens complain that mainland tourists handicap their daily lives and deteriorate the tension between HongKong and mainland.
A number of economists advocate the economic strength of The Individual Visit Scheme. Tourism is of utmost importance in HongKong since Tourism is one of the four pillar industries in HongKong along with financial services, trading and logistics, and professional services (Fan & Yim, 2011) and Tien (2013) remarked that tourism is only pillar industry in the city with sustained growth, being increased average percentage of 5.7% per year, compared to a 2.2% growth of the overall economy. In term of mainland sightseers, in 2010, the number of mainland visitors who arrived into HongKong hit over 20 million, accounting for 60 percent of all tourists, which is threefold Hong Kong’s population (Chan, 2011). Also, Mainland travelers are the biggest consumers. Mainland Tourist spent about HKD165 billion in 2010, which accounted for 69% of the total visitors spending in 2010.To be more surprise, Mainland tourists expended HKD7, 453 per person per trip in 2010, 10.8% above the average (Fan & Yim, 2011). Therefore, the Individual Visit Scheme is...

...report analyses the provision of cheque services by Bank of China (HongKong) and evaluates the need for providing such a service. Most, if not all, banks provide this service. Nevertheless the report’s aim is to overlook this tradition and give an insight into whether a bank should really be providing this service. The Bank Wide Operation Department is in charge of the bank’s cheque clearing process. A staff member from this department was interviewed regarding the cheque services. The report reviews the current system setup to deal with cheques and forecasts what the future holds for a cheque service providing bank.
Investigation of the current system reveal problems that are encountered in processing cheques such as time delay and administrative complications which bring up the question of continuing the provision of cheque services. Further findings include The Payments Council’s plans to abolish cheques by the year 2018. Nevertheless, the cheque is still favourable to certain groups of consumers who do not have personal bank accounts.
Several recommendations are made to overcome the issues faced when providing the cheque services. There is some truth in the belief that cheques will be used for at least another decade and corporations’ long term decisions usually do not cover very long time periods owing to the rapidly changing nature of the...

...development of China affect the political, social and economic developments of HongKong in the second half of 20th century?
HongKong and China developed rapidly in the second half of the 20th century. HongKong had a close relation with the mainland China whether in political, economic or social aspects. There were many cooperation and interaction between HongKong and mainland China. Therefore, the developments of China affect the political, social and economic developments of HongKong.
On political aspect, the developments of China brought the political and institutional changes to HongKong. It also led to political movements in HongKong. Firstly, in1967 during the Cultural Revolution, the1967Riots broke out in HongKong. As this was coincident with the ‘Cultural Revolution’ on the mainland, people were very much influenced by left-wing ideology, and the HongKong and Committee for Anti-HongKong British Prosecution Struggle was set up. A large-scale riot resulted, and was suppressed by force in December and the government had learnt a lesson. After the riots, the government became more...

...DEPARTMENT OF ASIAN & POLICY STUDIES
Exploring Political and Social Issues in HongKong
(COC1022)
Guidelines for Self-exploratory study
(I) Overview
•
The self-exploratory study is designed to provide students with unique
opportunities to have an in-depth examination of major political and socioeconomic issues facing HongKong today. The self-exploratory study will
be divided into two components, including the Group Presentation and the
Individual Written Report.
(II) Group Presentation
•
Due date: Week 12 & 13
•
Grade Weighting 40%
•
The whole class will be divided into presentation teams (each team
comprising around 5 to 6 members). Each team will be required to
conduct self-exploratory study on an assigned political or social issue in
HongKong and to give an oral presentation in English on Week 12 & 13.
•
Each team will be required to give a 45-minute oral presentation on an
assigned topic in English, followed by 15-minute question and answer
session.
•
Each team should prepare a PowerPoint to summarize their arguments
and analysis and should distribute sufficient copies of the handouts to both
Course Instructor and fellow classmates.
(III) Individual Written report
•
Due date: 30 April 2014
•
Grade Weighting 30%
DEPARTMENT OF ASIAN & POLICY STUDIES
•
Following the oral presentation, students should submit...

...
* Discuss the factors which have promoted the growth of HongKong as a ‘global city’, and the forces which will determine its future growth development.
Word count: 1952 words
Globalisation that is happening in the world today gives rise to the context of global cities. This global city is advanced culturally, socially, politically and especially economically. HongKong is considered as a major city in the world. In fact, it is regarded as the 5th global city in the world. According to Mr. Andrew Chen of HongKong company incorporation agency, Janus Corporate Solutions, it acts as a finance hub, business and commercial hub, arts hub, and cultural hub, all rolled into one (Ali, 2010). Factors such as connectivity, proximity to China, low tax system, ease of HongKong company setup, and excellent infrastructure have made HongKong the centre of business activity in Asia (Ali, 2010).
Much of the global cities in the world had distinguishing history that makes them an important city in the world today. HongKong owes its status now because of its history too. HongKong was a colonial city, founded by the British in 1840s, and it became the second most important port centre after Shanghai on the China coast during the century following its...